The IRS released Notice 2020-32 on April 30, 2020. In the notice, the IRS provides guidance regarding the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). Guidance and rules regarding the Paycheck Protection Program (“PPP”) loans continue to unfold. Prior to this notice, it was unclear whether a payment would be considered a “tax benefit” or not. The notice explains that loan recipients will be eligible for forgiveness of a covered PPP loan in the amount equal to the total of payroll, mortgage interest, rent and utilities incurred and paid during the defined eight-week period following the funding of said loan.
Furthermore, income associated with the forgiveness is excluded from gross income for purposes of the Code pursuant to the CARES Act. This guidance underscores the fact that “double dipping” will not be allowed under the IRS Code for an expense that is otherwise deductible.
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On April 27th, 2020, the Supreme Court ruled in favor of four health insurers who filed suit against the United States for billions of dollars for failure to pay risk corridor payments established as part of the Affordable Care Act (“ACA”), Section 1342. The ACA provision was intended to prevent hefty premiums and encourage risk-averse insurers to participate in the Marketplace by offering policies that covered individuals with pre-existing conditions and who might have higher than expected insurance claims. According to the National Law Review, “To mitigate insurers’ risk entering unpredictable new marketplaces, Congress created the “Risk Corridors” program, set out in §1342 of the ACA, which allowed insurers to share both profits and losses in the new marketplaces’ first three years of existence. Under § 1342, if the insurance plans were not profitable, then the federal government “shall pay” the insurers according to the formula specified in the statute, to compensate for their losses; but if the insurance plans were profitable, then the insurers were required to share the benefits with the federal government by paying it according to the statutory formula.”
In the case, Maine Community Health Option v. The United States, by a vote of 8-1,the Supreme Court awarded over $12 billion in unpaid risk corridor payments to insurers from 2014 to 2016. The Supreme Court ultimately ruled against the Federal Government, who argued that in 2014, after the ACA legislation was established, Congress passed an appropriations bill, blocking the payments of CMS (Center for Medicare and Medical Services) funds to pay for the program, claiming the corridors would be revenue-neutral. The insurers when determining their premiums for the opening of the exchange health plans were told by the CMS, they would be paid regardless of the amount the government collected through the program. Unfortunately, in the first three years, the insurers’ claims vastly exceeded the amount collected. This deficit resulted in many smaller insurers and co-op health insurance plans to go out of business Other insurers left the Marketplace or increased their premiums. The insurers argued that the government violated the original legislation, which claimed they would be reimbursed for losses if they participated in the Marketplace exchanges and this could not be revoked by Congress after the fact with riders in an appropriation bill.
Ultimately the decision by the Supreme Court determined insurers were owed the risk corridor payments. It was stated in Justice Sonia Sotomayor’s majority opinion “these holdings reflect a principle as old as the Nation itself: The Government should honor its obligations.” This ruling is imperative to keeping the ACA exchanges in place and help keep health insurance premiums affordable to all. Insurance experts claim that the lack of funding to help these insurers in the preliminary phase of the ACA caused premiums to increase in the Marketplace. However, according to the Kaiser Family Foundation, “ACA premiums are falling in many areas of the U.S. in 2020”. To see how premiums are changing in your region visit, https://www.healthcare.gov/health-plan-information-2020/ where you can access a pricing tool for 2020 health plans.
During the COVID-19 pandemic, Americans are facing many hurdles: a healthcare crisis, a struggling economy, social isolation, remote learning, working from home, and many other challenges. To help flatten the curve and slow the spread of the virus, most states have issued a stay at home order, resulting in many non-essential businesses having to close. Since some businesses were unable to continue operations, they had to make the difficult decision to lay off employees. Many of these individuals who lost their jobs also lost their health insurance that came with it.
Americans are now not only worried about being exposed to the virus but also how they will pay for their treatment with no health coverage if they were to become infected. According to the Kaiser Family Foundation, the cost to an uninsured patient that is hospitalized with severe symptoms of COVID-19 could exceed $40,000. To help reduce the risk of excessive medical costs, several states have established a special open enrollment period to make the process of enrolling in health coverage easier with fewer restrictions. Currently, under the ACA guidelines, an individual who has a life event, such as loss of employment, can enroll in health coverage in the federal marketplace within 60 days of losing his/her job. However, with the expansion of the state’s own ACA healthcare special open enrollment periods, an individual can enroll without having to prove special conditions, such of loss of employment or other “qualifying life events” which would allow an individual to enroll in health insurance outside of the open enrollment period.
There are 10 states, plus the District of Columbia, that have their own state-run marketplaces and have been able to establish a special open enrollment period These states include California, Colorado, Connecticut, Maryland, Massachusetts, Minnesota, Nevada, New York, Rhode Island, and Washington. Other states, that use the federal government health insurance marketplace, www.healthcare.gov, have not offered an extended open enrollment period to Americans who may have been without insurance or lost their insurance. Two major national associations, America’s Health Insurance Plans and Blue Cross Blue Shield Association, have sent a letter to Congress asking the Federal Government to consider a special enrollment period to help alleviate the worries of both the hospitals and individuals so that those being admitted will have adequate health coverage during these uncertain times. According to the Kaiser Family Foundation, there were approximately 28 million uninsured Americans before the COVID-19 pandemic. Based on the model published by Proceedings of the National Academy of Sciences of the United States, it is estimated that between 2%-7% of the uninsured will require hospitalization. While the states that established special open enrollment periods to help the uninsured is an option for individuals residing in these areas, those who are uninsured in other regions of the United States need to look into possible affordable options for health insurance to avoid the possibility of facing large medical bills.
According to an NBC News article, the COVID-19 Pandemic could be a true test of how well the ACA will handle significant coverage loss. Prior to the pandemic, approximately half of Americans were insured through their jobs. Millions are finding themselves in a most unfortunate position today due to having lost health insurance in addition to having lost their jobs.
10 U.S. states and Washington, DC are offering their uninsured residents an opportunity to sign up for a health plan outside of the traditional enrollment season. (CA, CO, CT, MA, MD, MN, NV, NY, RI, VT, WA, DC).
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The Corona Aid, Relief, and Economic Security Act (CARES) is the third stimulus bill passed to help provide relief to individuals and businesses in reaction to the current Coronavirus pandemic. The CARES Act contains provisions that are important to sponsors of group health plans as well as qualified retirement plans and fringe benefit plans. Here is a brief summary of some of the entitlements under this legislation that affect healthcare plans.
Group Health Plans would be required to reimburse out-of-network providers for any Covid-19 tests and other services related to the Covid-19 virus. Providers are required to publish the cash price online or risk a penalty by HHS of up to $300 per day.
Group Health Plans would be required to cover the cost of preventative services in relation to the COVID-19 virus, specifically vaccines, without pre-authorization.
A HDHP with an HSA would cover telehealth services without having to satisfy the plans minimum deductible.
HSAs, FSAs and HRAs funds can be used to purchase over-the-counter medications without a prescription including the purchase of menstrual care products. This change repeals the ACA regulations that prohibited these reimbursements.
Other important elements to The CARESAct in regard to retirement plans and fringe benefits are summarized below.
Allows an individual affected by
COVID-19 to withdraw up to $100,0000 from their eligible retirement plan
without incurring early withdrawal penalty. Individuals can avoid paying income
tax if the amount is repaid within three years.
Individuals can take loan up to 100 percent of
the vested amount in account, up to $100,000, as opposed to previous rules
where participant could only withdraw 50 percent of their vested amount.
Payment of loan can be deferred for one year,
with repayment due within 5 years.
Interest will be incurred during the delayed payment period.
Plan sponsors can rely on participant’s
self-certification for withdrawal of funds as long as plan is amended by the
end of 2022 plan year.
Allows plan sponsors to waive the minimum
distribution requirements for 2020 for certain Defined Contribution Plans
including employers maintaining single-employer pensions plans with due dates
in 2020 until January 1, 2021.
Department of Labor has the authority to
postpone ERISA filing deadlines for a period up to one year because of public
Employers can provide up to $5250 in tax-free student
loans repayment benefits. This means the employer could contribute to student loan
payments for their workers and it would be included as income.
This overview provides some of the provisions in The CARES Act. It is advisable to contact your TPA or benefits attorney for more detailed information or if you have any questions on specific details. We are anticipating further legislation in the coming months that will offer continued relief to businesses and individuals during this pandemic.
With efforts to help reduce the spread of the coronavirus epidemic many companies that employ hourly workers such as restaurants and bars were ordered to close. Many other industries due to shelter in place orders around the country have had to resort to short term layoffs, or furloughs, of their employees due to the lack of work. The government has passed legislation to try to help companies and employees with a stimulus package to get through these months where income has come to a halt. However, once the coronavirus spread has slowed and companies are able to open back up and start bringing back workers there will be questions on how the temporary layoffs or furloughs will impact companies when it comes time to determine their eligibility for an offer of health insurance.
Under ACA guidelines companies need to offer health insurance coverage to employees that average over 130 hours per month. There are two methods of measurement used to determine eligibility for their variable hour workers, a.k.a. hourly workers, The Monthly Measurement Method or The Look-Back Measurement Method. It is recommended under the current circumstances that companies use the Look-Back Method to minimize the risk of ACA penalties. For the Look-Back Method you can set a measurement period, typically 6, 9 or 12 months, not to exceed 12 months, add the total hours for the employee for the designated measurement period and divide by the number of months you were measuring to get the average. Since there will be a gap in hours for the time an employee was not working during the epidemic, employers need to know how this can impact the measurement for an employee. It is recommended to consult a knowledgeable ACA reporting company to make sure your company is adhering to the ACA reporting guidelines and avoiding possible exposure to penalties.
Amid the COVID-19 outbreak and the “stay at home” order by many states, companies are losing business and struggling to pay bills and their employees. Due to these circumstances, businesses are having to make the difficult decision to either furlough or layoff a significant amount of their employees. The number of unemployment claims filed as of April 4th was 6.6 million, a new record from the 3.3 million record claims in the previous week, and is expected to continue to grow significantly. Along with loss of employment, many individuals have also lost their access to health insurance.
If you find yourself among this group of unemployed, now is the time to act so you don’t find yourself in a situation where you need medical attention and don’t have health coverage, especially during a time when we are facing a worldwide epidemic. Many are wondering what options they have if they lose their health insurance. Here is a short summary of some healthcare options for unemployed workers:
MARKETPLACE – You may qualify to enroll in Marketplace insurance, which was established as part of the Affordable Care Act. Typically, you would enroll in a health plan on the Marketplace (https://www.healthcare.gov/) during the Open Enrollment Period, November 1st 2020 until December 15th 2020. However, a loss of a job is considered a qualifying “life event”, which would make you eligible for a Special Enrollment Period (SEP). You only have 60 days from the time of the qualifying event to apply for the special enrollment, so you must act quickly. If you miss the deadline, you may need to wait until the open enrollment period.
COBRA – Under the Consolidated Omnibus Budget Reconciliation Act (COBRA), you are entitled to keep the health insurance from your former employer for up to 18 months. This insurance can be very expensive since you will be responsible for the total monthly premium. According to the Kaiser Family Foundation survey data, the monthly premium for single coverage in 2019 was $7,188 and $20,576 for family coverage. This could be difficult to afford after losing your job.
MEDICAID – Medicaid is an insurance program run by the government and eligibility varies from state to state. Medicaid offers free or low-cost insurance coverage based on income and family size. Many states have expanded their Medicaid benefits under the Affordable Care Act. To determine if you are eligible you can complete an application on your state’s health insurance marketplace.
Another possibility for some may be to enroll in a spouse’s or family member’s employer-sponsored plan. According to the ACA regulations, children under the age of 26 can be covered under a parent’s plan. You have 30 days from the time your employer stops paying for insurance to enroll in family member’s plan. Since enrollment periods for health plans are time sensitive, you need to act quickly to avoid a lapse in coverage.
It is important to take the time to review these options now to determine the best fit for your needs.